COLUMBUS, Ohio – While many people would love to leave 2020 completely behind, they need to take a look back to prepare for the tax season ahead.
What you need to know
- 2020 can be one of the most complicated tax years
- People don’t have to pay income tax on stimulus checks
- But have to pay taxes on unemployment
- People can only claim the home office deductions if they are self-employed
From stimulus checks to mass unemployment and millions of Americans moving their offices to their homes, the pandemic has caused a myriad of changes that can now affect the way people file this year.
“2020 will be years of tax law change for most Americans,” said Mark Steber, Jackson Hewitt’s chief tax information officer. “It will literally affect every one of the 165 million taxpayers.”
He said he could never remember a year when people had more questions about a filing season.
“The key this year is going to be like an Easter egg hunt. You have to look in several places to make sure you find the golden egg,” he said. “And this year there are a lot more places to look, a lot more risks of not looking closely enough.”
He said many people have some of the same questions as others.
A stimulus check is an income that people are not taxed on. Steber also said if someone doesn’t believe they have all of the stimulus money they owe, they can add that to their 2020 filing to ensure they get that money.
When it comes to unemployment, nearly 60 million Americans have claimed this benefit this year, and that’s taxable income as always.
Steber said there are differences.
“This year they passed a new piece of law, just this earlier piece of legislation, that says that if you’ve been unemployed and your income has gone down, and some of the 27 million people who are receiving Earnings Credit may have less Earned Income Tax Credit “You can look back on your previous return and choose the better of the two years for your Earned Income Tax Credit calculation,” he said.
Steber, one of the million Americans who now work from home, said a Jackson Hewitt survey found that about 80% of respondents believed they could qualify for the home office withdrawal, but he said that it doesn’t quite work that way.
“If you are doing your home work for your self-employed business, you are part-time or part-time and the answer is’ yes,” “he said. “If you only work at home for your employer, the answer is no. But there is another loophole. If you work both your regular job and at home but have a part-time job, or your spouse or important person has someone else a part-time job, then the answer can be yes. “
Steber said things can get even more complicated if someone is now working from home in a different state than their employer.
Because of all of these varied complexities, he said that going without a tax advisor this year could cost people a lot if they leave loans or deductions off the table.
“I think 2020 will be an oversized year full of opportunities and risks,” said Steber.
With the new round of stimulus reviews having a higher priority, the IRS has not announced when it will start accepting tax returns.
But Jackson Hewitt said early filing is the best option, whether it means a faster return or money owed, it gives people more time to save until April 15th to pay.